ACC644 Financial Statement Analysis
Comprehensive Project
OBJECTIVE
Financial Statement Analysis project involves a team of students analyzing financial statements of two (2) companies from the same industry and prepare a written analysis as well as recommendations.
ADDITIONAL RESOURCES
In addition to these guidelines, additional information is provided on the company’s Web site, library databases and the textbook including: formulas and guidelines for calculations, information about the two (2) companies being analyzed, and any special considerations related to the specific companies or current economic conditions.
DESCRIPTION
The team will be analyzing each company’s annual report (10-K filing), which serves as a “résumé” of a corporation. The Generally Accepted Accounting Principles (GAAP) and the Securities and Exchange Commission (SEC) provide much of the information in corporate annual reports and in the 10-K. Specifically, GAAP requires annual reports to disclose four financial statements: a Balance Sheet, a Statement of Cash Flows, an Income Statement and a Statement of Retained Earnings.
FINANCIAL STATEMENT ANALYSIS PROJECT
Spring 2015
FORMAT FOR PROJECT:
TITLE PAGE
The first page of the project is the title page, which lists the following:
• FINANCIAL STATEMENT ANALYSIS PROJECT
• Analysts’ (Participants’) Names
• Date
The body of the project must consist of the following six (6) sections - clearly marked.
SECTION 1: EXECUTIVE SUMMARY
In this section provide a brief overview of each of the two corporations. Participants are not limited but, at a minimum, should provide the following information for both companies:
• Official name of the corporation
• Location of the corporate headquarters
• The state in which the company is incorporated
• Company Internet address
• Stock symbol of the corporation and the exchange on which it is traded
• Fiscal year-end of the corporation
• Date of the 10-K filing according to the financial statements provided
• The company’s independent accountant/auditor
• The primary products(s) and/or services (s) of the corporation
SECTION 2: BALANCE SHEET ANALYSIS
1. Using elements listed on your company’s balance sheet, prepare a common size balance sheet using the following format. (Vertical Analysis Chapter 5)
COMPANY #1
Account
Current Year
%
Prior Year
‘ %
COMPANY #2
Account
Current Year
%
Prior Year
‘ %
2. Using elements listed on your company’s balance sheet calculate the increase or decrease in dollars and percent between the years using the following format. (Year to Year Change Analysis Chapter 5)
COMPANY #1
Account
Current Year
Prior Year
+/- $
%
COMPANY #2
Account
Current Year
Prior Year
+/- $
%
3. Using elements listed on your company’s balance sheet calculate the ratios and amounts using two years prior as the base year (100%) using the following format. Your answers should all be in percentages (Horizontal Analysis Chapter 5).
.
1. ACC644 Financial Statement Analysis
Comprehensive Project
OBJECTIVE
Financial Statement Analysis project involves a team of
students analyzing financial statements of two (2) companies
from the same industry and prepare a written analysis as well as
recommendations.
ADDITIONAL RESOURCES
In addition to these guidelines, additional information is
provided on the company’s Web site, library databases and the
textbook including: formulas and guidelines for calculations,
information about the two (2) companies being analyzed, and
any special considerations related to the specific companies or
current economic conditions.
DESCRIPTION
The team will be analyzing each company’s annual report (10-K
filing), which serves as a “résumé” of a corporation. The
Generally Accepted Accounting Principles (GAAP) and the
Securities and Exchange Commission (SEC) provide much of
the information in corporate annual reports and in the 10-K.
Specifically, GAAP requires annual reports to disclose four
financial statements: a Balance Sheet, a Statement of Cash
Flows, an Income Statement and a Statement of Retained
Earnings.
FINANCIAL STATEMENT ANALYSIS PROJECT
Spring 2015
2. FORMAT FOR PROJECT:
TITLE PAGE
The first page of the project is the title page, which lists the
following:
• FINANCIAL STATEMENT ANALYSIS PROJECT
• Analysts’ (Participants’) Names
• Date
The body of the project must consist of the following six (6)
sections - clearly marked.
SECTION 1: EXECUTIVE SUMMARY
In this section provide a brief overview of each of the two
corporations. Participants are not limited but, at a minimum,
should provide the following information for both companies:
• Official name of the corporation
• Location of the corporate headquarters
• The state in which the company is incorporated
• Company Internet address
• Stock symbol of the corporation and the exchange on which it
is traded
• Fiscal year-end of the corporation
3. • Date of the 10-K filing according to the financial statements
provided
• The company’s independent accountant/auditor
• The primary products(s) and/or services (s) of the corporation
SECTION 2: BALANCE SHEET ANALYSIS
1. Using elements listed on your company’s balance sheet,
prepare a common size balance sheet using the following
format. (Vertical Analysis Chapter 5)
COMPANY #1
Account
Current Year
%
Prior Year
‘ %
COMPANY #2
Account
Current Year
%
Prior Year
‘ %
4. 2. Using elements listed on your company’s balance sheet
calculate the increase or decrease in dollars and percent
between the years using the following format. (Year to Year
Change Analysis Chapter 5)
COMPANY #1
Account
Current Year
Prior Year
+/- $
%
COMPANY #2
Account
Current Year
Prior Year
+/- $
%
3. Using elements listed on your company’s balance sheet
calculate the ratios and amounts using two years prior as the
5. base year (100%) using the following format. Your answers
should all be in percentages (Horizontal Analysis Chapter 5).
COMPANY #1
Account
Current Year/Base
Prior Year/Base
COMPANY #2
Account
Current Year/Base
Prior Year/Base
4. In thoughtful, well-organized paragraphs comment on
changes you see in the balance sheet with regards to each
company over the two-year period.
Among the items to consider:
a. Comment on any significant changes in each company in
assets and liabilities.
b. Comment on any significant changes in each company in the
composition of current assets and current liabilities.
c. Which assets in each company have the most significant
investment?
d. Are the companies financed primarily with debt or equity?
e. Is the debt primarily short-term or long-term?
f. Compare the balance sheets of both companies with regards to
size and composition of assets, liabilities, and stockholder’s
equity.
6. SECTION 3: INCOME STATEMENT
1. Using elements listed on your companies’ income
statement, prepare a common size income statement using the
following format. (Vertical Analysis Chapter 5)
Company #1
Account
Current Year
%
Prior Year
%
Two Years Ago
%
Company #2
Account
Current Year
%
Prior Year
%
Two Years Ago
%
7. 2. Using elements listed on your companies’ income
statement calculate the increase or decrease in dollars and
percent between the years using the following format. (Year to
Year Change Analysis Chapter 5)
Company #1
Account
Current Year
Prior Year
+/- $
%
Two Years Ago
+/- $
%
Company #2
Account
Current Year
Prior Year
+/- $
%
Two Years Ago
+/- $
%
8. 3. Using elements listed on your company’s income
statement calculate the ratios and amounts using two years prior
as the base year (100%) using the following format. Your
answers should all be in percentages. (Horizontal Analysis
Chapter 5)
Company #1
Account
Current Year/Base
Prior Year/Base
Two years ago/ Base
Company #2
Account
Current Year/Base
Prior Year/Base
Two years ago/ Base
4. In thoughtful, well-organized paragraphs comment on
9. changes you see in the income statements for each company
over the three-year period.
Among the items to consider:
a. What is the trend, in each company, in total
revenues over the three years?
b. What is the trend, in each company, in gross
profit over the three years?
c. What is the trend, in each company, in net
income over the three years?
d. What is the trend in profit margin over the three
years?
e. Comment on any significant changes in revenues
or expenses, negative and positive changes for each company.
f. Comment on any significant changes in the
discontinued operations, extraordinary items, or changes in
accounting policy for each company.
SECTION 4: RATIO ANALYSIS
Compute the ratios for the most current year in following
categories.The calculations used to determine the answers for
the ratio analysis must be included in the Appendix.
Liquidity Ratios
Company #1
Company #2
Current Ratio
Acid (Quick) Ratio
Working Capital
10. Cash Ratio
Days Sales in Receivables
Accounts Receivable Turnover
Accounts Receivable Turnover in Days
Days Sales in Inventory
Inventory Turnover
Inventory Turnover in Days
Operating Cycle
Sales to Working Capital
Operating Cash Flow to Current Maturities of Long-term Debt
and Current Notes Payable
Long-Term Debt Paying Ability
11. Company #1
Company #2
Times Interest Earned
Fixed Charge Coverage Ratio
Debt Ratio
Debt / Equity Ratio
Debt to Tangible Net Worth Ratio
Operating Cash Flow / Total Debt
Profitability Ratios
Company #1
Company #2
Net Profit Margin
Total Asset turnover
Return on Assets
12. Sales to Fixed Assets
Return on Investment
Return on Total Equity
Return on Common Equity
Gross Profit Margin
Investor Ratios
Company #1
Company #2
Degree of Financial Leverage
EPS - Basic
EPS - Diluted
Price / Earnings Ratio
Percentage of Earnings Retained
13. Dividend Payout
Dividend Yield
Book Value
Operating Cash Flow / Cash Dividends
For each group of ratios, comment on:
1. As a category, what is being measured?
2. What does it mean?
3. What is the relative position of each of the corporations?
4. Who are the users of this information?
5. Which company is in the best overall position?
SECTION 5: CONCLUSIONS/RECOMMENDATIONS
Draw conclusions from the data that was gathered in the
previous sections and determine the relevant position of each of
the corporations in all of the analyses. The
conclusions/recommendations must address the following as a
comparison between
the two companies. The thoughtfulness of the analysis will be
the most important factor in the evaluation of this section.
1. What are the overall strengths and weaknesses of each
14. corporation?
2. What recommendation would you make to current and
potential private or organizational investors in the two
corporations?
3. What recommendation would you make to lenders regarding
the credit-worthiness of the corporations?
4. Position, salary and benefits being equal, which company
would you prefer to work for?
SECTION 6: PUBLIC PERCEPTION AND RECENT RESULTS
Regardless of the “on paper” financial strength of a company,
decisions are often made based on the public perception of a
company. A rumor within the financial industry may make it
difficult for a company to obtain a loan. Negative publicity may
force other companies and private citizens to “stop doing
business” with a company. Even a company who performed
well, but missed analyst projections, may see a drop in public
confidence and a reduction in stock value. Yahoo finance is a
great source for research. Based on current research, answer the
following questions:
1. What is the general sentiment toward each company?
2. How does the financial industry currently perceive each
company?
BASED ON THE FINDINGS:
3. How has public perception positively or negatively affected
the companies?
15. 4. What, if anything, has the company done to counter any
negative sentiment that may exist?
5. How, if at all, has the company capitalized on any positive
perceptions that may exist?
Finally, obtain the most recent financial reports filed with the
SEC by each of the two companies and evaluate recent
performance. Answer the following questions:
6. Since the 10-K filing analyzed in the previous Sections, how
have each of the two companies generally performed?
7. Were there any noteworthy disclosures in the most recent
filings?
BASED ON FINDINGS
8. How has each of the companies’ stock performed over the
last 24 months?
9. Would you say the company has positive or negative
momentum moving in to the close of its next fiscal year?
10. Would you change any of your conclusions or
recommendations from the previous section based on current
financial information?
Page 2 of 8
16. An Example of APA Format
JONE
Social media
1
Running Head: APA FORMAT
4
APA FORMAT
Abstract
Begin a new page. Your abstract page should already include
the page header. On the first line of the abstract page, center the
word “Abstract” (no bold, formatting, italics, underling or
quotation marks.
Beginning with the next line, write a concise summary of the
key points of your paper. (Do not indent.) Your abstract should
contain at least your research topic. You may also include
possible implications of your research. Your abstract should be
a single paragraph double-spaced. Your abstract should be
between 150 and 250 words.
It has come to my attention that a refresher on paper
17. organization and APA Style. I will address these issues to help
you in this class and for future reference in other classes and/or
in your career. Dale Carnegie once said “Tell the audience what
you’re going to say, say it; then tell them what you said”
http://quotationsbook.com/quote/37013/. He was referring to
how to organize an oral presentation, but the format also holds
in written communications. I’ll indicate what goes into each
section of an essay.
“Tell your audience what you’re going to say…” Your
introductory paragraph should provide the reader an outline of
your paper. It should present your main thesis/issue, how you
will address this issue, and your conclusion.
“... say it…” The middle paragraph(s) should flow from your
introduction and elaborate on your key issue(s). You should
support your contentions with information from the course
and/or outside readings. Simply stating your position without
support is not enough.
“… tell them what you said.” The last paragraph summarizes the
information obtained in the middle paragraph(s). In addition,
you should provide concluding remarks.
I’ve placed a link to a website that provides general information
on APA format in each learning module. I’m also including it
here for your review
http://owl.english.purdue.edu/owl/resource/560/01/.
In conclusion, it is my expectation that you will adhere to all
elements of the APA guidelines, including title page format, the
inclusion of an abstract, spacing, margins, and appropriate way
to cite materials within your essay and in the reference section
of your paper. In addition, your essays should include a
beginning, a middle, and an end.
References
Single Author
Last name first, followed by author initials.
Berndt, T. J. (2002). Friendship quality and social development.
Current Directions in Psychological Science, 11, 7-10.
Two Authors
18. List by their last names and initials. Use the ampersand instead
of "and."
Wegener, D. T., & Petty, R. E. (1994). Mood management
across affective states: The hedonic contingency hypothesis.
Journal of Personality and Social Psychology, 66, 1034-1048.
Three to Seven Authors
List by last names and initials; commas separate author names,
while the last author name is preceded again by ampersand.
Kernis, M. H., Cornell, D. P., Sun, C. R., Berry, A., Harlow, T.,
& Bach, J. S. (1993). There's more to self-esteem than whether
it is high or low: The importance of stability of self-esteem.
Journal of Personality and Social Psychology, 65, 1190-1204.
Online Publication
Author, A. A., & Author, B. B. (Date of publication). Title of
article. Title of Online Periodical, volume number (issue
number if available). Retrieved from
http://www.someaddress.com/full/url/.
Other examples can be found on the OWL at Purdue website.
See the menu on the left of the screen.
http://www.sec.gov/Archives/edgar/data/1308208/00011931251
4100166/d663220d10k.htm
(UACL 2013)
http://www.sec.gov/Archives/edgar/data/1308208/00011931251
3112236/d456969d10k.htm
(UACL 2012)
http://www.sec.gov/Archives/edgar/data/728535/000143774914
002605/jbht20131231_10k.htm
(JBHT 2013)
http://www.sec.gov/Archives/edgar/data/728535/000143774913
001883/jbht_10k-123112.htm(JBHT 2012)
19. those links belong to two companies that you must write an
executive summary for them
executive summaries must be in this format that I posted below.
SECTION 1: EXECUTIVE SUMMARY
In this section provide a brief overview of each of the two
corporations. Participants are not limited but, at a minimum,
should provide the following information for both companies:
• Official name of the corporation
• Location of the corporate headquarters
• The state in which the company is incorporated
• Company Internet address
• Stock symbol of the corporation and the exchange on which it
is traded
• Fiscal year-end of the corporation
• Date of the 10-K filing according to the financial statements
provided
• The company’s independent accountant/auditor
• The primary products(s) and/or services (s) of the corporation
ACC644 Financial Statement Analysis
FSA Comprehensive Project
Title Page
• FINANCIAL STATEMENT ANALYSIS PROJECT
• Analysts’ (Participants’) Names
• Date
Table of Contents